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Aspartame triggers a wild year.

Soft drinks sparkled in 1983, rising 4.5% to an all-time high of 6.5 billion cases sold and catching even the experts by surprise. Says John Maxwell, consultant to Beverage Industry magazine, "It was a success that no one could predict. Everyone expected little or no gain."

A warmer economy and a really scorching summer had much to do with it, but so did the industry itself. By taking dead aim at consumer concerns for health and fitness, soft drink makers won big.

Especially with diet sodas. Thanks to aspartame, a protein derivative 200 times sweeter than sugar and without saccharine's bitter aftertaste, Diet Coke scored what some industry observers call "the most successful new product introduction ever." Launched in the spring of 1982, Diet Coke had by the end of 1983 climbed into fourth place in popularity among all soft drinks. This year it will probably place third. Says a Shasta Beverage Co. executive, with grudging admiration, "Diet Coke has been an outstanding success. It has hurt us all."

How important the diet category is to the supermarket is underscored by Don Morrison, PepsiCo's vice president, sales development: "Just five years ago, diet drinks had 17.3% of the total soft drink market. This year they're headed for 24% to 25%."

Coke's success triggered a burst of new formulations. Diet Coke was quickly joined by Diet Pepsi, Seven-Up's Diet 7UP and sugar-free Like cola, sugar-free Dr Pepper and Pepper Free, Royal Crown Cola's Diet Rite, and a host of other brands from smaller and regional bottlers. In a 15-month period, nine major colas were introduced, more than in all the years since Coca-Cola was first concocted in 1886.

Almost two-thirds of industry volume comes from colas and undoubtedly the action will be concentrated within the diet cola segment. Coke has already cornered about a 41% share of this segment, while Pepsi holds about 22% and Seven-Up and Dr Pepper have about 8% each. Within food stores these ratios change a bit. For example, Coke gets only 35% of its volume from food stores, whereas Pepsi achieves 50%.

"Diet sales were growing before aspartame but there is no doubt that this new sweetener had an enormous impact on sales," says one distributor. "Without diet's 24% growth, the entire industry's sales would have remained flat." (Beverage mixes too are benefitting. Borden, General Foods and Thomas J. Lipton are marketing aspartame-sweetened products with generally good results.)

Aspartame is marketed under the name Nutrasweet. Because it is expensive, most drinks contain a portion of saccharine, although Procter & Gamble's Crush International is using 100% NutraSweet in Orange Crush. The caffeine factor

In the mushrooming segment of caffeine-free drinks, case movement rose 200% in 1983, a seemingly more dramatic increase than diet's. Says Morrison, "Caffeine-free cola sales alone have gone from almost nothing in 1979 to an estimated $1.2 billion for this year." Overall volume of caffeine-free drinks is difficult to judge because many drinks were caffeine free all along, but only recently chose to promote the fact.

When Seven-Up seized the mantle of consumer responsiveness with its "no caffeine, no artificial colors, no artificial flavors" for its brands, caffeine-frees really took off. Seven-Up's flagship 7UP and Diet 7UP accounted last year for a 437 million case volume. Add another 24 million cases for its new caffeine-free cola, Like, and five million cases of the even newer caffeine-free, sugar-free Like, and you understand why Seven-Up's director of national sales, Tim Battles, thinks the word "free" is rich in meaning. "The new diet drinks have tended to cannibalize the existing flagship brands," he says, "with the result that the low-caffeine 7UP brands have outpaced the industry in sales volume growth and percent of volume growth for more than 20 consecutive months."

Coke, for example, concedes that Tab has been losing market share since the introduction of Diet Coke. In response, Tab is being reformulated with the addition of aspartame and $26 million has been set aside for advertising in 1984--about half of the amount spent in introducing Diet Coke.

While Coke quickly moved into diet drinks and captured first place, Pepsi was even quicker to respond to the flight from caffeine. Its Pepsi Free rapidly achieved a first-place share of 44% of the caffeine-free cola segment.

All this activity has given these two giants an opportunity to stress innovation rather than discounting and comparative taste testing, but no one expects the soft drink department to be an oasis of refreshing calm. Between them Coke and Pepse are expected to spend $500,000 to continue their bitter cola and caffeine wars.

Nor will consumer choices lessen. Interviews with suppliers and industry observers suggest that americans--already faced with a selection of 230 soft drink items vs. only 150 seven years ago--will be able to enjoy new levels in convenient packaging, new sizes, new flavors and new health and fitness related products.

A sampling: More 12-packs and 2-liter sizes are planned for distribution. Shasta is marketing Spree, a line of all-natural flavors. Corr's of Chicago includes Ginseng Rush among its new natural line. Pepsi has introduced Slice, a low carbonated, 10% fruit juice-based soft drink. Higher concentrations of asapartame are planned for a whole range of drinks. Seagram's, the giant liquor concern, is going national with a mixer line. High fructose corn syrup should continue to supplant sugar in regular sodas.

Also coming up: low-sodium drinks by Royal Crown. Says one observer, "Don't underestimate this trend. Royal Crown was first with the diets and the caffeine-frees and has a reputation for spotting new potential. An estimated 80 million Americans are said to be concerned about their salt intake.

"Another thing to watch is aseptics. The soft drink makers are all looking at this new way of putting up fruit drinks as a source of new volume. A few of them are already in the business and the betting is that they will market these lines more effectively than the traditional fruit juice people will."

In packaging, plastic bottles have increased their share of the business by 9%, to a 21% share; cans increased 7% to a 36% level and glass declined 3% to a 43% share. A resealable aluminum "bottle" is being tested and Coke is monitoring results from its new 12-pack of 16-ounce bottles. a gravity feed system for 2-liter bottles on the top shelves of supermarkets is said to be successful. But it had better be flexible. A 3-liter bottle is also being tested.

Another possible growth area is use of suppliers' computerized programs that electronically evaluate and draw up planograms for maximizing shelf space, based on contribution of all brands to a supermarket's shelves. (See beer/wine section for details of the approach.)

As for soft drink mixes, their volume was up mildly, according to warehouse withdrawal figures, and because of new lines and additions of aspartame, predictions are that these products will do well in 1984. Non-alcoholic cocktail mixes, although a relatively small factor, are also expected to fare well.

Bottled water, the third highest volume generator in the soft drink department, continued its solid growth, rising 22% last year. Average per capita consumption is now 2.7 gallons yearly, up from 2.2 gallons in 1982. Aided by a growing distrust on the part of many consumers about the quality of municipal water supplies, and abetted by supplier promotion of their natural, "healthful" qualities, bottled waters have passed wine in popularity. Sales in 1984 are expected to continue their growth, but at a more modest pace.
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Title Annotation:soft drinks and mixes
Publication:Progressive Grocer
Date:Jul 1, 1984
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